Overview
Nearly a century after the Robinson-Patman Act[1] was enacted, there has been a significant uptick in private and governmental efforts to enforce the price discrimination statute in the past two years.
Section 2(a), the core price discrimination provision of the Act, makes it unlawful for a seller “to discriminate in price between different purchasers of commodities of like grade and quality” where such discrimination is likely to adversely affect competition.[2] However, sellers can justify price differentials in a number of ways to avoid liability, including by showing “differences in the cost of manufacture, sale, or delivery” of the goods,[3] identifying changing market conditions,[4] lowering their prices to match their competitors,[5] or proving that the lower price was functionally available to all customers.[6]
Section 2(d) of the Act prevents sellers from circumventing Section 2(a) by offering favored customers greater promotional allowances, services, or facilities rather than simply lowering their prices.[7] However, there are fewer defenses available in a Section 2(d) action, and defendants may avoid liability by showing that the benefits are “available on proportionally equal terms” to competitors.[8]
A rare example of successful private enforcement of Sections 2(a) and 2(d) of the Act is L.A. International Corp. v. Prestige Brand Holdings, Inc., et al., No. 2:18-cv-6809. In this Central District of California case, wholesalers of Clear Eyes eye drops brought suit against the distributor and its parent company for offering lower prices to big-box stores. The wholesalers prevailed at a December 2023 jury trial on the price discrimination claim. The court subsequently ruled that the defendants also violated Section 2(d) by participating in a Costco program under which they made quarterly payments to Costco for advertising and promotional services.[9] The federal court entered a permanent injunction requiring the distributors to offer Clear Eyes at the same price and make all promotional programs equally available to all customers.[10] The decision is currently being appealed to the Ninth Circuit.
The resurgence of Robinson-Patman Act enforcement is also visible in renewed efforts in the public sector. In September 2022, FTC Commissioner Alvaro Bedoya gave the first of several statements calling for an end to the decades of non-enforcement of the Act.[11] And earlier this year, several members of Congress urged FTC Chair Lina Khan to revive the FTC’s enforcement of the Robinson-Patman Act.[12]
With the writing on the wall suggesting a new era of Robinson-Patman Act enforcement, motor vehicle manufacturers must remain vigilant as to how their pricing structures, incentive programs, and support services may run afoul of the statute. While price discrimination is already front of mind for many automakers, the recent victory for plaintiffs enforcing Section 2(d) suggests that careful attention should also be paid to how dealer support programs could be found unlawful if not offered on proportionally equal terms to all dealers.
[1] 15 U.S.C. § 13.
[2] 15 U.S.C. § 13(a).
[3] Id.
[4] Id.
[5] 15 U.S.C. § 13(b).
[6] See, e.g., Mathew Enter., Inc. v. Chrysler Grp., LLC, 738 F. App’x 569, 570-71 (9th Cir. 2018); Enterprises v. Volvo Cars of N. Am., LLC, 2016 WL 4480343, at *4 (S.D. Ohio Aug. 25, 2016).
[7] 15 U.S.C. § 13(d)
[8] Id.
[9] L.A. Int’l Corp. v. Prestige Brands Holdings, Inc., 2024 WL 2272384, at *11 (C.D. Cal. May 20, 2024).
[10] Id. at *14-15.
[11] “Returning to Fairness” Prepared Remarks of Commission Alvaro M. Bedoya Federal Trade Commission (Sept. 22, 2022) https://ftc.gov/system/files/ftc_gov/pdf/returning_to_fairness_prepared_remarks_commissioner_alvaro_bedoya.pdf.
[12]Letter from Senator Elizabeth Warren, et al. to FTC Chair Lina Khan (Mar. 28, 2024) https://www.warren.senate.gov/imo/media/doc/2024.03.28%20Letter%20to%20FTC%20re%20Robinson%20Patman%20Act1.pdf